The discussion of the CPI groups below is ordered in terms of their significance to the change in All groups index points (see tables 6 and 7).

HOUSING (+1.4%)

Prices for all components of housing rose this quarter. The main contributors to the increase were house purchase (+1.1%), property rates and charges (+5.1%), electricity (+2.3%), rents (+0.4%), water and sewerage (+2.3%) and house repairs and maintenance (+1.0%).

The house purchase index rose in all capital cities, except Adelaide, driven by increasing labour and material costs. The fall in Adelaide's house purchase was a result of a range of bonuses being offered by a number of the surveyed builders. The increase in property rates and charges, electricity and water and sewerage was mainly attributable to the annual review of these charges by State and local government authorities and utility providers.

Over the twelve months to September quarter 2004, housing prices rose 3.6%. All components of housing increased with house purchase (+4.7%), rents (+2.5%), property rates and charges (+5.2%) and house repairs and maintenance (+2.4%) being the most significant contributors to the increase in overall housing prices.

FOOD (-0.6%)

The fall in food prices this quarter was mainly due to a decrease in the price of vegetables (-7.7%), fruit (-2.2%), pork (-5.7%) and bacon and ham (-4.0%). These decreases were partially offset by price rises for lamb and mutton (+4.8%), restaurant meals (+0.6%) and take away and fast foods (+0.5%).

Fruit and vegetable prices fell for the second consecutive quarter but were still above prices for the corresponding period twelve months ago. In the September quarter 2004, price falls associated with abundant supplies of lettuces, tomatoes and seasonal winter vegetables such as broccoli and cauliflower, more than offset small price rises for cabbages and celery. For fruit, significant price falls for citrus fruit, strawberries and kiwi fruit, which were also associated with plentiful supplies, more than offset moderate price increases for apples, bananas and melons.

Underpinning the fall in pork, bacon and ham prices was a high supply of imported pork meat. The increase in lamb and mutton prices follows on from the record prices being attained for lamb at the saleyard, as a result of low supplies due to the drought.

Over the twelve months to September quarter 2004, food prices rose 2.1%. The main contributors to the increase were fruit (+11.6%), restaurant meals (+3.9%), take away and fast foods (+2.6%) and soft drinks, waters and juices (+3.8%). Partially offsetting these increases were falls in the price of bread (-3.9%), bacon and ham (-3.8%), tea, coffee and food drinks (-2.7%) and food additives and condiments (-2.6%).

TRANSPORTATION (+0.8%)

The rise in transportation prices was mainly due to increases in automotive fuel (+3.3%), motor vehicle repair and servicing (+1.6%) and other motoring charges (+1.6%), such as motor vehicle registration, drivers' licences and parking fees. Partially offsetting these increases was a fall in the price of motor vehicles (-1.8%).

There were few changes in the list prices of motor vehicles in the September quarter. However, competitive pricing between dealers to clear stocks before new models arrive in December quarter and the offering of incentives such as bonus inclusions, drive-away deals and factory cash-back offers, resulted in the observed price fall. Prices for both locally produced and imported motor vehicles fell in the quarter.

Over the twelve months to September quarter 2004, transportation prices rose 2.8%. Increases in automotive fuel (+12.0%), motor vehicle repair and servicing (+3.0%) and other motoring charges (+3.2%) more than offset a fall in motor vehicles (-4.2%).

The rise in the recreation index this quarter was mainly due to increases in overseas holiday travel and accommodation (+2.2%), sports participation (+1.7%) and pets, pet foods and supplies (+3.2%). These increases were partially offset by decreases in audio, visual and computing media and services (-2.0%) and audio, visual and computing equipment (-2.5%).

The rise in overseas holiday travel and accommodation was attributable to increased air fares to all surveyed destinations, in particular, coinciding with the shoulder/peak season in Asia and the peak season in Europe and North America. Price discounting on computer stationery such as ink cartridges, printing paper and CDs was largely responsible for the fall in audio, visual and computing media and services, while continuing discounting on a number of home entertainment items by retailers, contributed to the fall in audio, visual and computing equipment.

Over the twelve months to September quarter 2004, the recreation index fell 0.1%. Falls in audio, visual and computing equipment (-16.6%), audio, visual and computing media and services (-3.9%) and overseas holiday travel and accommodation (-2.2%) more than offset increases in domestic holiday travel and accommodation (+3.6%), other recreational activities including cinema and theatre admission (+4.4%), and sports participation (+4.3%).

MISCELLANEOUS (+1.2%)

The rise in prices in the miscellaneous group was attributable to increases in child care (+4.6%), insurance services (+1.1%), toiletries and personal care products (+0.6%) and hairdressing and personal care services (+0.7%).

Child care costs rose at most of the surveyed providers due to increased operating costs.

Over the twelve months to September quarter 2004, prices for the miscellaneous group rose 2.5%. Child care (+10.3%), hairdressing and personal care services (+3.9%), insurance services (+1.4%) and toiletries and personal care products (+0.5%) all increased.

HEALTH (-0.7%)

The fall in health costs in the September quarter was due to a fall in the net cost of pharmaceuticals (-4.4%) as a direct result of the cyclical effect of the Pharmaceutical Benefits Scheme safety net. Small increases in hospital and medical services (+0.1%) and dental services (+1.0%) partially offset this decrease.

The 0.1% rise in hospital and medical services was the smallest increase in this index since the introduction of the Federal Government's 30% rebate on private health insurance in March quarter 1999. An increase in general fees for a number of medical practitioners' and hospital charges was largely offset by a small increase in bulk billing ratios for some services and the negative impact on out-of-hospital medical expenses of the Medicare Plus safety net which was introduced in the March quarter this year.

Over the twelve months to September quarter 2004, health costs rose 5.8%. Hospital and medical services (+7.7%), dental services (+5.2%) and pharmaceuticals (+1.5%) were the main contributors to this increase.

TRADABLES AND NON-TRADABLES

For the sixth consecutive quarter, the increase in the All groups CPI was largely driven by domestic price pressures. The non-tradables component (see table 8), which represents approximately 55% of the CPI, increased by 0.9% while the tradables component decreased by 0.1%. Within non-tradables, the services component rose 0.8%, driven largely by increases in property rates and charges, motor vehicle repair and servicing, house repairs and maintenance, rents, other motoring charges and child care. The non-tradables goods component rose 0.9% with house purchase, electricity, beer and water and sewerage being the main contributors.

Within tradables, the goods component fell 0.2%. Significant contributors to this fall were vegetables, motor vehicles, pharmaceuticals, fruit, audio, visual and computing media and services and women's outerwear, while automotive fuel and tobacco provided the most significant offsetting price increases.

Over the twelve months to September quarter 2004, non-tradables rose 3.6% and tradables rose 0.7%. This compares with increases of 4.1% and 0.5%, respectively, for these components in the twelve months to June quarter 2004.

CAPITAL CITIES COMPARISON

ALL GROUPS

ALL GROUPS: PERCENTAGE CHANGE FROM PREVIOUS QUARTER

At the All groups level, the CPI rose in all capital cities in the September quarter 2004. The increases ranged from 0.2% in Melbourne to 0.9% in Darwin. The higher result in Darwin was mainly due to that city recording increases in recreation and alcohol and tobacco which were well above the national average.

The lower result in Melbourne was largely due to that city recording an increase in transportation costs which was half the national average and the equal largest fall in food prices (with Hobart) of all capital cities.

Over the twelve months to September quarter 2004, the All groups CPI rose in each of the eight capital cities. The increases ranged from 1.7% in Melbourne to 2.8% in Hobart.

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